As city revises its pot rules, business owners say tough licensing has taken toll

Dan Boden weighs out medical marijuana for a patient at Boulder Kind Care in August 2011. The dispensary no longer has an active license from the city of Boulder, which has seen a decrease in the number of marijuana-related businesses since a peak in 2010. (Mark Leffingwell / Camera file photo)

When Boulder first established a specific license to help regulate medical marijuana businesses in 2010, more than 200 pot-related companies -- dispensaries, grow operations and infused-product manufacturers -- already were up and running throughout the city, remitting sales and use taxes under generic business licenses.

In November of that year, city officials received applications for the new medical marijuana licenses from 119 businesses, most of which already were open.

Yet today, nearly two years later, Boulder's marijuana industry has thinned significantly, with just 26 dispensaries and 32 grow operations still operating in the city.

A strict approach to background checks weeded out many of those initial applicants, forcing them to shutter or abandon plans to open. But closures continue in Boulder; as recently as March, there were 32 active wellness center licenses in the city.

Some medical marijuana business owners say Boulder's strict approach to regulation has pushed even "good" operators out of the trade, and they wonder whether the intent of regulation was to winnow the number of businesses that opened during the green rush of 2009 and 2010.

"It's like one strike and you're done," said Diane Czarkowski, one of the founders of Boulder Kind Care, the first Boulder dispensary to receive a business license from the city.

Tired of dealing with regulations, Czarkowski -- who describes herself as "more of a vision person" -- sold her shares and got out of the pot business in March, though she still works as a consultant and advocate.

Boulder Kind Care does not appear on a current list of licensed dispensaries provided by the city, and the center's outgoing phone message says it is "temporarily closed due to lack of product."

"I have never heard that or gotten the impression that that's what council wanted," Senior Assistant City Attorney Kathy Haddock said of limiting the number of dispensaries. "I do think they want businesses that follow the rules and that's important."

Boulder is in the process of revising its medical marijuana ordinances in preparation for November's expiration of a moratorium on new business licenses. The city is taking public comment on the issue until Sept. 21, and, as of Friday, officials had received more than 400 responses.

At a meeting Friday with marijuana business owners, many pushed back against possible restrictions on advertising (could a T-shirt be considered advertising?) and labeling requirements (labs that purport to test the THC content of marijuana can return widely differing results, they noted).

Afterward, Czarkowski, who hasn't ruled out getting back into the business, said she felt like Boulder is being more open to business concerns.

"I left there feeling so much better about the attitude," she said. "I felt like we had a voice."

'Fair shake in Boulder'

Travis Howard, a business attorney who also owns a dispensary (which he declined to identify), said Boulder's high standards have an upside. They create a model for other cities as more and more states legalize medical marijuana.

"I'm appreciative that Boulder has given us an opportunity," Howard said. "It's being executed professionally. I feel like I have a fair shake in Boulder, and not all of my colleagues around the state feel that way."

At the same time, Howard said he felt Boulder businesses "absolutely" have lost their licenses over technicalities.

In addition to businesses closing or having their licenses revoked, City Tax and License Manager Mishawn Cook said she's seen more license transfers and share sales cross her desk in the last six months.

"This is an expensive business to run," she said. "Compliance-wise, it's a business process that requires a lot of oversight. It requires following the law."

Federal enforcement against dispensaries within 1,000 feet of schools also has forced several dispensaries to close, though some have managed to move.

But attorney Jeff Gard, who represents a number of medical marijuana businesses, said Boulder's code doesn't make provisions for businesses to pay fines or penalties to make up for minor violations. He tells clients they have to make following the law their first priority.

"These businesses need to remember that they are not in the medical marijuana business," Gard said. "They are in the medical marijuana compliance business. They need to put compliance first and foremost above everything else."

Gard said he believes the lack of provisions for violators who generally are law-abiding was an oversight.

"I don't think anybody had in mind that if there was a single hair out of place, the businesses would be shut down," he said.

Haddock, however, said the city sees higher rates of non-compliance from marijuana businesses than from other types of businesses, even heavily regulated ones such as those with liquor licenses.

"It's often people who haven't been in business before and don't know the law and that they have to follow the law," she said.

'Lot of moving parts'

Even as the number of dispensaries has declined in Boulder, tax revenue from the medical marijuana industry has remained relatively stable. As of May 2012, the most recent month for which data is available, marijuana businesses remitted $314,803 in sales tax to the city, compared to $312,433 by May 2011.

In addition to the dispensaries, Boulder is home to 32 grow operations, including several for dispensaries located in other cities.

Boulder Mayor Matt Appelbaum said there is a public policy concern related to the number of marijuana businesses.

"There's a question on whether they're taking up a disproportionate amount of industrial space, and we don't make any money off of (the grow operations) and they don't provide that much employment," he said.

Appelbaum said he's waiting for more information from city staff before coming to any conclusions about how the city's rules should evolve.

He's also waiting for the results of November's elections.

A statewide referendum could legalize marijuana at the state level, or a Republican victory at the presidential level could bring even tougher federal enforcement.

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